tv [untitled] February 7, 2011 8:30am-9:00am PST
>> good afternoon. i am the project manager for our new headquarters at but hundred 25 golden gate. i want to give you an update on the project and to review of the project budget. i will wait until the slide comes up. all right. hopefully, most of you have noticed the project going up next door, adjacent to the court house. we are now above our adjacent neighbor. we added a seventh story this week. according to the construction schedule, we are at about 25%
completion. as the building rises, you gain economies and are able to shave days off the schedule, but with the weather our concrete has been very temperamental. one of the sustainability stories of this project is the very high some of replacement in our concrete mix -- the very high amount of replacement in our concrete mix, a 75% ash and other materials. we are going to top of the building in april. then we will begin installation of the curtain wall system, the exterior glass and stone skin of the building. that will be completed in september. biotech is almost completed. we will complete it in a couple -- bauuyout is almost completed. we will complete it in a couple of months. we have completed 91%, which
means we have 9% of the construction value remaining to bid and contract. once we complete bayouts, -- buyouts, we can set in our contract with that cost. with local work force goals, we are currently achieving 45% local work force in our contracts. i want to assure you this slide. it has a couple of pictures of the curtain wall mockup that was completed in november. the pictures represent the corner at golden gate and polk street, the second level. the other picture represents the polk street side, where the corner is the glass and then you have a panel of granite. this depicts the extrusions on the south elevation. the markup was completed in
november and underwent testing for the curtain wall system. tests confirmed we have a very sound curtain wall system. the first thing i want to review today on the project is the construction costs. in october, bids came in above budget in the following areas -- mechanical, plumbing, electrical, and interiors. this is largely due to the complexity of the design and our sustainability goal. construction costs of work last estimated at 50% completion of design documents. details of some of the more complex elements of the building had not yet been completed. delays in design also caused costs in terms of construction getting ahead of coordination of mechanical, electrical, in conduit, which added cost to the bid. while labor costs came in higher than estimated, the biggest
impact has been new technology in three materials inc. into the design of the building. fort -- and green materials which have been incorporated into the design of the building. anything that is not industry standard comes in with a premium above budget. in the case of interior bids, we have changed some of the materials to reduce the impact of the higher bids. at the end of the day, we are $3 million above the original budget, 2% higher. we will implement construction contingency fund to fund these costs. -- we will implement construction contingency funds to fund these costs. the second part of this review is non-construction costs. we have increased the budget substantially for the following reasons. the first is furniture.
the original budget only included funds for workstations, and we are finding that in order to meet requirements and the unique features of the building we need to provide new furniture for all of our spaces, including private spaces and conference facilities. the primary conference room is located on the north side of the building at the north east corner. that is correct. as the building rises, it becomes more narrow, requiring a shaped table. in general, it is smaller than our current furniture accommodates. the purchase on furniture is $7 million and the original budget for workstations only is $4 million. the planning efforts with puc divisions, we have developed a budget for building communications systems including telecom, security, and a v equipment needs for the data center, conference facilities,
and into credit controls for the building system. the network system is critical to operate the building as a smart building. one of the unique sustainability features of the building is that we will have fully integrated building systems. all building systems will be able to talk to each other, maximizing efficiency. window shades, lighting, heating, and cooling wall talk to each other. this will increase the efficiency of the building and comfort of the occupants. there are monitors at this -- monitors outside the building for the movement of the sun. it directs shades to move up and down over the course of the day. as shades move down, lighting inside increases. there are zones within each floor for mechanical and lighting so that it is colder on the north side than the south side it adjusts the system appropriately and minimizes -- and maximizes the efficiency of those systems.
we will have integrity controls that will work in unison together instead of controls that do not communicate. without communication between the systems, this results in waste. as a smart building, all the building systems will be controlled through the building not work, requiring the network to go into the building before we can start commissioning the building. building systems integration was not part of the original design or original budget for the building. this cutting edge technology for reducing the building's impact on the environment is common practice in europe and asia. so it is not new technology. but it is not practiced in the united states building industry. this is 3.6 of the costs. another 2.1 is to modified -- is to modify our phone system.
we also need to allocate funds for recall -- for relocating the puc to the new headquarters. the total for non-construction costs is $11 million. while these costs for moving into the new building and setting up new systems were anticipated, my predecessor had expected funding through the operating budget. we are coming with a plan to include the costs in the project budget. we propose to revise the project budget from $191 million to $201 million, a 7% increase. the non-construction furniture, building communications, and relocation budget would be funded by energy conservation bonds and hetchy power savings. this is a great candidate for the energy conservation bond. todd is available to explain any
questions you may have on the source of these funds. i can answer any questions you have on the budget. thank you. >> you will notice these additional funds you will see in the budget discussion over the next month. you will see it as part of the budget discussion. if you have any questions, we would be happy to answer. >> i have a question. did you say that we are meeting the local work force that we had projected? >> we have established a goal of 50%, so we are getting there. >> i am sorry. did you say we are getting there? >> we are at 45% right now. >> this building is similar to the concept in the federal building? >> yes and no. it is a different design and different approaches, and we are installing shades. >> so the problems in the
federal building will be -- >> that is why my last comment, yes. >> when these budget variances come up, do you factor in life cycle savings as well? i mean, if -- >> the things we are looking at, like having the smart building with integrated systems, will make for savings. we have not been able to calculate those and show you. as we get it set up correctly, we will know the savings on the other side. we do not have an exact calculation yet. >> as far as water, energy, and renewable energy, yes. it is a challenge because of what we actually pay for energy. it is more of a demonstration. >> it would be great to get that in our next update on what those numbers are really penciling out to be. understanding is a demonstration. >> we can tell you what this
building will cost and how much it will use compared to a similar building of this size. we know it is vastly different. >> i had one other question on all the old furniture. i guess you have to buy all new furniture. what is going to happen? i know there is an ordinance for materials, right? so all the old wood and steel frame stuff i imagine now gets recycled as part of our green building ordinance. but all of that old furniture -- i do not know if it is covered by that. maybe it could be folded into community benefits work or rebuilding the south facility. >> there is a process. first, we put it on to the virtual warehouse for the city. our old furniture may still be new to somebody else in the city. there is a hierarchy of where it can be used. the hierarchy includes nonprofits. i would not expect it would go to waste. if you have balked to market
street -- walked to market street, you can tell what you're people moved in. in some years, it is built in furniture because regret special deals with the landlord. in other years, it looks like cardboard. in other years, it looks like very good furniture. there is no consistency to it at all. the biggest problem right now is that it is all fairly tall. the whole building, the idea is like from the outside. if you bring in tall furniture, you cannot get the light, which is a leed problem. >> one would have imagined we would have had this discussion earlier. it is a different point of view depending on where you are in the city. public works is managing this problem. they view it as you build a building and give it to the people who own it to take care of it. there is a sense that in most cases if you are looking at laguna honda, how you move furniture or people is somebody
else's problem. my view is that it is one to it -- is one building and you should know all the costs. until we were able to go through what was in and what was not in, we were not able to figure that out. since then, we have been trying to cut to get back within budget. we have cut a variety of things. the things that are left are items we think are necessary. >> you have one other funding source as hetchy power settings. is that less consumption in the building? >> we are producing so much power this year at times we would normally have purchased power, that is saving us money. we are not only not buying it, but we are selling it. that combination is giving us additional money. >> any other questions on 525 golden gate? thank you so much.
>> mr. rydstrom? >> todd rydstrom, assistant general manager and cfo. i have the next two items on the general managers' report. i know this commission and commissioner moran have been looking to us to provide additional succinctly worded accomplishments and efficiencies. what is before you in your packet is a document, 18 pages. i will put it on the overhead briefly so the public can see the front cover. what this document does is it summarizes the hard work of two individuals in particular, if i could ask them to stand briefly. ty june from communications, and francis lee, the deputy cfo.
it is really a code -- an accomplishment. we have come before you and we have documents earlier on your calendar. you received a comprehensive annual financial report. this is that detailed reading of 245 pages that i find to be very interesting, including 10- year histories of operations and key statistics. this also is france'es lee's had work. we submitted that for an award. to assist -- to distill this big document into 18 pages that are more user-friendly that we can take to neighborhood groups showing how average bills -- on page 12, how an average bill from the water department compares to a customer's average cable bill, shows just how affordable our rates here are getting, the 24/7 service we
provide. we are looking to you to make enhancements every year. we will publish it annually and updated. both the general manager and i will be working with the staff to make any edits or enhancements that you would like to see. >> one question i had was just the status. is this a draft we are looking at, or is this the final version? >> this is the final out today. we can make additions to it throughout the year. our cycle for publishing would be to do a wholesale revisiting every year after we published a comprehensive report, so that is all the most recent statistics. to the degree we have a mid-year revision or enhancement, we are not opposed to doing that mid- year. >> it is also designed to be more online than printed, which
allows it to be updated for printing very small quantities. >> that is helpful. i was trying to figure out what my comments were directed toward as at its work featured in the future. when we first talked about this some time ago, part of what was on my mind was that one of these days we will have to ask for a rate increase again. at that time, i would expect that we would have -- basically, we have to stand and deliver and say that giving as a five-year rate structure was a wise thing to do, that the money that was given to us as part of that as well as wsip is well spent, giving credibility to the rate increase, and at that at the end of that five-year interval we would have barely digestible documents that would support -- fairly the adjustable documents that would support what we did. that gives us the opportunity to
answer the obvious questions and to toot our horn and give information about things people might not think to ask about. within this particular document, i think there are a couple of obvious questions that we missed. let me give you two. one is the wsip program did not really have a section devoted to it. obviously, it was reflected in the financials. there were some things the or ancillary to it. there was nothing that said, "here is how we are doing on the wsip program." second, there was an expenditure chart in there. over the past five years, there has been a 40% increase in our expenses, and there is no comment that says it is a reasonable thing. there may be others. those were two obvious ones that came up.
we should try to address those. i will not suggest whether you do that on the current report, but by the next time we issue this we should have those conversations. >> i will definitely take that point. on the second point, we will highlight the additional debt service costs. 80% of what we are doing on our rates are increases to pay the debt from the capital program and increase cash flow. we will make sure to incorporate both of those. >> the graph i was thinking of was the stacked bar charts. what pages that? page 15, the stacked bar chart. it shows personnel depreciation, interest, contractual, and materials. that seems a pretty hefty increase over that five-year interval. >> ok. >> just to go along on commissioner moran's comment, i
received correspondence forward to me -- forwarded to me recently from a constituent in san francisco who was concerned that rates for water have doubled in the past five years. that is obvious to us as well. i think an explanation of that is important as we prepare for the future in respect to a number of the issues we have raised here today, and also the cost for recycled water. we can educate the ratepayers as well. i will get into more detail with you in a specific letter citing those issues. >> thank you very much. >> i would be happy to do that. also, we can huge page 11 to highlight how our -- we can use page 11 to highlight the bill and how much cheaper we are for the community with water and sewer service. we will be happy to respond on that. >> there are two different
versions here. page 11 and 12 are different versions. >> if i was on the stc, i would certainly be able to see the cost. that is a good comparison. thank you. >> basically, a chart shows a portion of this report on the wholesale rate that is attributed to the increase. there is not anything like that for the and city rate, which is the kind of thing we've talked about it could be helpful. another thing that springs from this is a good section on the sustainability plan. is that coming back to us any time soon? i am looking at the advanced calendar. >> i will double check one is coming back. but yes, we have been trying to merge with the strategic plan we did last summer. i am reviewing a draft of it friday. i do not know when it is rolling
out, but i will look. >> we should probably make sure that is on an advanced calendar. i am sorry. i think he said this. how many of these get printed and distributed? >> we are doing very small print jobs as needed. the goal is to do as much as we can electronically, on the website. all the sfpuc employees are seeing it in their on-line newspaper. this morning, we met with jpmorgan, who has been buying over and a billion dollars of our bonds just to walk them through what we think will be the third of our award winning publications to communicate the financial and operational successes of sfpuc. it is really going to depend upon different venues. >> perhaps some of these
comments could be integrated into the online version as soon as possible. >> i would be happy to do it. >> thank you. any other comments on the annual report? >> the third item is the water bond update. we've been selling a lot of bonds since december. we sure did. we had another very successful sale, also led by deputy cfo charles bird in the front row. we had another very successful sale in december. what this means with those $530 million we sold in december -- we have sold $2.70 billion of the $4.60 billion water system improvement bonds. the bidding environment looks very helpful to the san francisco public utility commission and the water department in particular. if i could just have the camera zoomed in on this a little bit,
we achieve savings of what equals about $62 million compared to what our financial plan had assumed. we are doing financial plan projections assuming we are able to borrow money at 5%, and instead we were able to borrow money at 4.8% and 4.5%. in addition, we have gone out and borrowed 40-year debt with a fixed rate. the good news for our ratepayers' is we have locked in those rates and they will be able to benefit from low rates for the next 40 years on this debt. it was a competitive sale. we closed right before the holiday -- the christmas holiday season, closing december 22. the tax exempt structures went out 20 years. that was about $10 million of savings. we were very eager to go to market because we wanted to capture one more sale benefiting
from the american recovery and reinvestment act build america bonds. that program allowed the federal government to pay 35% of the interest cost for the rate payers and provide a subsidy. that meant that our rate payers locked in on that build america bond portion -- that was equivalent to $52 million of savings over the next 40 years. we successfully had a program run by mr. perle and his staff. the bidders love our bonds because they not only secret information like we have shared with you before, they see our quarterly budget statements. they also see our website that mr. harrington walked through. those materials show the up to date -- up-to-date water and power generation. investors like to see that level
of transparency, including these two bids. but the tax exemptions, you have five bidders. citigroup was the winning bid. whenever selling bonds competitively, the bidder has to buy everything or nothing. it goes to the lower bidder and the best deal for the rate payer. jpmorgan we also visited with earlier this morning. they have been very aggressive in bidding. they bought over $1 billion of our bonds over the next -- over the last 18 months. this was the most savings for the repairs, coming in at 4.5% annual true interest rate. the calendar for the water bond -- i mentioned we have sold $2.70 billion to date. what this means just on wsip, the water system improvement project -- we have locked in
place six great costs that are paying -- that are saving the ratepayer $3.60 million. if we add on to that the refunding we have done on water, waste water, and the waste water bonds were sold last summer, we have locked in place a total of $450 million of savings lower than what we had projected. here is our right modeling long term. that is really helping us cover a lot of the shortfall in revenues where we had at lower water sales and lower sewer treatment. you look at that thursday in the budget. we have $1.90 billion more to sell from wsip. we will next need money in the summer, about $600 million in june or july. because the build america bonds program has expired and the president and congress are not looking to renew it, that means we will go back to the tax- exempt market.
that is a much smaller pool of investors who buy those bonds. we are looking at every opportunity we can to get our name out there, tell our story, the great savings we report to you on our contracting out. we regularly share that with potential investors who see quarterly reports. they do look at our point -- our 245-page document, our annual report. that is one of our key target markets. this is another success story. we look forward to a answering any questions you might have. >> congratulations, mr. rydstrom, once again. commissioners, any questions? bravo. >> and thanks to charles, too. >> thank you, charles. we really appreciate it. any public comment on the general managers' report? hearing none, at next item
please. >> the next item would be the "supply and conservation agency general manager report. i believe mr. james is here. >> good evening, members of the commission. i am c.e.o. and general manager of the agency that represents 26 of your wholesale customers outside of san francisco. i would like to meet with you and check with you. president -- commissioner torres, i have not forgotten my promise to meet with you. i hope the rest of you stay put so we can schedule meetings. i will keep my remarks brief. you had a discussion in december at your last meeting. you had a number of items on your calendar. i want to make comments about some of those. you had a presentation by mr. rydstrom on financial issues and rate setting. part of that had to do with water savings and how